American Health Care Act: CBO Analysis

13th Mar 2017
The Congressional Budget Office in conjunction with the staff of the Committee on Taxation developed the long-awaited estimates related to the Concurrent Resolution on the Budget for Fiscal Year 2017 directed the House Committees on Ways and Means and Energy and Commerce to develop legislation to reduce the deficit.

The Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) have produced an estimate of the budgetary effects of the American Health Care Act, which combines the pieces of legislation approved by the two committees pursuant to that resolution. In consultation with the budget committees, CBO used its March 2016 baseline with adjustments for subsequently enacted legislation, which underlies the resolution, as the benchmark to measure the cost of the legislation.  Since this was a budget reconciliation bill the bill had to reduce the budget to move forward.

“CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion over the period, and revenues would be reduced by $0.9 trillion.”

Reduction in deficit numbers is always a cause for celebration, however, the way these numbers are reached will give health advocates pause.  The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance. “The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance.”  in 2018 alone, 14 million more people would be uninsured under the legislation than under current law due to some choosing not to be covered any longer since the penalty will be repealed but others will not be able to afford insurance because of rising premiums.  

The numbers get grimmer as the years advance.  The number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. The report cites that the reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped. In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.  This almost doubles the uninsured estimates under the Affordable Care Act.  

With regard to premiums, the legislation would tend to increase average premiums in the nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law. In 2018 and 2019, according to report estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up.

Although average premiums would increase prior to 2020 and decrease starting in 2020, CBO and JCT estimate that changes in premiums relative to those under current law would differ significantly for people of different ages because of a change in age-rating rules. Under the legislation, insurers would be allowed to generally charge five times more for older enrollees than younger ones rather than three times more as under current law, substantially reducing premiums for young adults and substantially raising premiums for older people.  This old fart penalty does not sit well with this writer.  I am anxiously looking for the repeal of the Obama Death Panels and have not found it yet.

For numerous reasons, this bill has been claimed to be dead on arrival by friend and foe alike, but the reduction to the deficit will give this health nightmare legs it may need to move forward.   

For a more detailed read of the report see American Health Care Act.